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Napster subscriber tally hits 270,000

But sales are dwarfed by iTunes

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Napster entered 2005 with over 270,000 subscribers, 90,000 more than at the end of Q3 2004, the music download firm said today

But it remains a dwarf, when compared with its major rival, Apple's iTunes Music Store.

Napster's latest subscriber numbers yield a quarter-on-quarter sequential growth rate of 50 per cent, enough to make it the "fastest growing subscription service in the industry", according to CEO Chris Gorog.

Of the 270,000 subscribers, 44,000 were from university-funded subs, which in the past Napster has said yield little revenue. But assuming all of the remaining 216,000 were subscribing on day one of Q4 - a generous assumption - that amounts to subscription revenue of under $7m for the quarter.

Napster forecasts Q4 FY2005 revenues of $11m, so either a very big chunk of its revenue is coming from a la carte downloads - in spite of Napster's attempts to push buyers toward the higher-margin subscription products - or a shortfall is looming. Napster's Q4 FY2005 equates to Q4 calendar 2004.

Gorog said the 50 per cent sequential subscriber growth supports "our belief that the future of digital music is subscription services". Maybe, but it's interesting to note that Apple's iTunes Music Store contributed $177m to Apple's bottom line, according to the Mac maker's latest Securities and Exchange Commission filing.

To be fair, that figure incorporates sales of iPod accessories and related services, such as battery replacements. Based on the download numbers Apple has put out since October 2004, we reckon it sold around 80m downloads during Q4, which works out at around $79m in total at $0.99 a track - still way beyond Napster's revenues.

This suggests the pull-through from hardware sales - in this case demand for iPods - is a much greater force when choosing a music vendor than either the subscription or the a la carte download models. ®

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